Prop 7 has nothing to do with investing. If you dont want to invest in companies that dont conform to your ideals, then sell the fund. I am voting NO to prop 7 and I am concerned it even got on the proxy. This type of question makes me question Vangaurd fund managers.

I read Article 7(1) of the Rome Statute. I'm not seeing the slippery slope that you're so afraid of.

For the purpose of this Statute, "crime against humanity" means any of the following acts when committed as part of a widespread or systematic attack directed against any civilian population, with knowledge of the attack:
(a) Murder;
(b) Extermination;
(c) Enslavement;
(d) Deportation or forcible transfer of population;
(e) Imprisonment or other severe deprivation of physical liberty in violation of fundamental rules of international law;
(f) Torture;
(g) Rape, sexual slavery, enforced prostitution, forced pregnancy, enforced sterilization, or any other form of sexual violence of comparable gravity;
(h) Persecution against any identifiable group or collectivity on political, racial, national, ethnic, cultural, religious, gender as defined in paragraph 3, or other grounds that are universally recognized as impermissible under international law, in connection with any act referred to in this paragraph or any crime within the jurisdiction of the Court;
(i) Enforced disappearance of persons;
(j) The crime of apartheid;
(k) Other inhumane acts of a similar character intentionally causing great suffering, or serious injury to body or to mental or physical health;

Your example doesn't count as a crime against humanity. Pretty open and shut.

I read Article 7(1) of the Rome Statute. I'm not seeing the slippery slope that you're so afraid of.

Your example doesn't count as a crime against humanity. Pretty open and shut.

I'm sure crime against humanity has a legal definition. But what makes you think proponents of ethical filters in index funds will be content with excluding only companies that allegedly contribute to crimes against humanity?

For example, quite a few European index fund providers have adopted the ethical guidelines of the $900 billion Norwegian Government Pension Fund, which exclude almost 200 of the 2300 companies that MSCI classify as large caps, including household names such as Boeing and Walmart. The cumulative underperformance of these funds since 2002 has been about 200 basis points before costs.

I was surprised to see this on the ballot as well. I am personally sympathetic to the goals but I do not like the idea of any groups of investors enforcing their norms on all of Vanguard investors. Existing indices should be sufficient for investors who wish to select for their personal values.

But I am a bit dismayed opposing genocide is "political" or something to do with being "politically correct" rather than basic human rights.

I don't think anyone is "for" genocidal activities, but the framing of the question is dishonest and manipulative if you ask shareholders "do you want to fund companies' engagements in genocidal activities?"

I'm pretty sure those committing genocide and other attrocities against humanity are in fact "for" such activities.

"Invest we must." -- Jack Bogle |
“The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Prop 7 has nothing to do with investing. If you dont want to invest in companies that dont conform to your ideals, then sell the fund. I am voting NO to prop 7 and I am concerned it even got on the proxy. This type of question makes me question Vangaurd fund managers.

Why would it make you question the fund managers? Surely they had no role in suggesting it. Vanguard recommends voting against it. A curious group of people to blame, in my view.

"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

Can someone please provide an example of a listed U.S. corporation that contributes to genocide or crimes against humanity?

Most of the big "US" corporations, are now "multinationals", I'd venture to guess.

I read through all the posts here, and I don't feel any closer to any facts or research or science on voting for anything. I like to see pros and cons and other case references, say where this has been done, and had intended effects or not, not just random opinions. Not dismiliar to our our local elections, in California, there used to be a pros/cons handout, so one was making an somewhat informed decision. Sad IMHO. Can't vote on anything without information, that's my objection.

I'm afraid this whole thread is too close, to being illegal on BH, but the "US" has done plenty towards "genocide" in this world, again IMHO, (and this will be my only post).

I would agree, that 'the devil is in the details' , and again, who will be writing up the rules, on implementation , etc ..... Long ago I had a 'social fund', but I don't know if this is moving that direction, or a one off thing like 'divestment in apartheid' , which apparently Did have some effect.

And finally, how exactly did this get proposed? If it's Vanguard, I find it disturbing that they want to inject politics into their investment decisions.

From the look of it, any shareholder can propose pretty much anything. I wrote to the secretary requesting details on the proponents (the letter says they will provide names and shareholdings). I'm interested to see if this is a drive-by; that is, someone who bought a few shares solely for the purpose of proposing this idea.

Yes, how did this ever get into the proposal????

There are a lot of funds that would be modified. If Vanguard wants to offer another socially responsible fund, that is fine, but to change all of these funds? Ridiculous! They currently offer Vanguard FTSE Social Index Fund

The trustees’ response to the shareholder proposal and recommendation
The trustees of the Funds recommend that you vote against this proposal.
While the humanitarian issues on which this proposal is ultimately focused are
of consequence and deep concern, meaningful long-term solutions to these
issues require diplomatic and political resources to come together to implement
change. Importantly, your Funds are compliant with all applicable U.S. laws
on this matter. In addition, the proposal would interfere with the advisors’
fiduciary duty to manage your Funds in line with their investment objectives
and strategies. Finally, we believe that the divestment contemplated by the
proposal would be an ineffective means to implement the social change
it seeks.

Vanguard is fully compliant with all applicable U.S. laws and regulations.
The United States government, through its policymakers, has established
a clear legal framework wherein investments in companies that are owned or
controlled by the government of Sudan, among other countries, are prohibited.
The proposal does not take into account that the Funds are compliant with
these laws.

As an investment firm with a very large client base, Vanguard is periodically
asked by clients to modify our investments for a variety of reasons—from
environmental and social issues to humanitarian and political concerns. We
simply cannot manage the Funds in an effective manner that would address
all of these issues as well as, or better than, policymakers while fulfilling our
fiduciary obligation to shareholders.

The addition of further investment constraints is not in Fund
shareholders’ best interests.
Placing additional and specifically prescriptive constraints on a portfolio
manager’s investable universe, based on factors unrelated to a Fund’s stated
investment objective and/or investment strategies, could interfere with the
Fund’s obligation to its investors. Each of the Vanguard funds is required to
invest shareholders’ assets pursuant to a given fund’s stated objective. In the
case of actively managed funds, which seek to provide varying degrees of
current income and/or long-term capital appreciation, they are managed in
adherence to tightly prescribed parameters related to the geography, size,
sector, and/or style (e.g., growth vs. value) of the companies in which they
invest. Constraints imposed by third-parties could impair the ability of portfolio
managers to provide Fund shareholders investment returns that are competitive
with similar funds. Index funds typically seek to track the performance of a
benchmark index that represents either the broad market or a subset of the
market based on geography, size, sector, and/or style. As such, limiting a Fund’s
ability to invest in all of the constituent companies in its benchmark index could
introduce deviation (i.e., tracking error) between the Fund’s performance and
that of its benchmark index, which would be detrimental to the Fund’s
shareholders.

Divestment is an ineffective means to implement social change.
The trustees believe that divestment—especially in cases where a company
bears no direct relation to the issue at hand—is a particularly ineffective remedy.
Selling a company’s shares into the secondary market (i.e., not back to the
subject company itself) has no direct impact on the company’s capitalization,
and it simply puts the shares into the hands of another owner (one perhaps
with less concern for the underlying issues). Additionally, as investors in publicly
traded companies, the Funds are not well poised to influence matters that
extend well beyond the operations of their portfolio companies. While we
understand the concerns of shareholders who have submitted the proposal,
we believe that ending genocide requires diplomatic and political solutions.

The trustees’ response to the shareholder proposal and recommendation
The trustees of the Funds recommend that you vote against this proposal.
While the humanitarian issues on which this proposal is ultimately focused are
of consequence and deep concern, meaningful long-term solutions to these
issues require diplomatic and political resources to come together to implement
change. Importantly, your Funds are compliant with all applicable U.S. laws
on this matter. In addition, the proposal would interfere with the advisors’
fiduciary duty to manage your Funds in line with their investment objectives
and strategies. Finally, we believe that the divestment contemplated by the
proposal would be an ineffective means to implement the social change
it seeks.

Vanguard is fully compliant with all applicable U.S. laws and regulations.
The United States government, through its policymakers, has established
a clear legal framework wherein investments in companies that are owned or
controlled by the government of Sudan, among other countries, are prohibited.
The proposal does not take into account that the Funds are compliant with
these laws.

As an investment firm with a very large client base, Vanguard is periodically
asked by clients to modify our investments for a variety of reasons—from
environmental and social issues to humanitarian and political concerns. We
simply cannot manage the Funds in an effective manner that would address
all of these issues as well as, or better than, policymakers while fulfilling our
fiduciary obligation to shareholders.

The addition of further investment constraints is not in Fund
shareholders’ best interests.
Placing additional and specifically prescriptive constraints on a portfolio
manager’s investable universe, based on factors unrelated to a Fund’s stated
investment objective and/or investment strategies, could interfere with the
Fund’s obligation to its investors. Each of the Vanguard funds is required to
invest shareholders’ assets pursuant to a given fund’s stated objective. In the
case of actively managed funds, which seek to provide varying degrees of
current income and/or long-term capital appreciation, they are managed in
adherence to tightly prescribed parameters related to the geography, size,
sector, and/or style (e.g., growth vs. value) of the companies in which they
invest. Constraints imposed by third-parties could impair the ability of portfolio
managers to provide Fund shareholders investment returns that are competitive
with similar funds. Index funds typically seek to track the performance of a
benchmark index that represents either the broad market or a subset of the
market based on geography, size, sector, and/or style. As such, limiting a Fund’s
ability to invest in all of the constituent companies in its benchmark index could
introduce deviation (i.e., tracking error) between the Fund’s performance and
that of its benchmark index, which would be detrimental to the Fund’s
shareholders.

Divestment is an ineffective means to implement social change.
The trustees believe that divestment—especially in cases where a company
bears no direct relation to the issue at hand—is a particularly ineffective remedy.
Selling a company’s shares into the secondary market (i.e., not back to the
subject company itself) has no direct impact on the company’s capitalization,
and it simply puts the shares into the hands of another owner (one perhaps
with less concern for the underlying issues). Additionally, as investors in publicly
traded companies, the Funds are not well poised to influence matters that
extend well beyond the operations of their portfolio companies. While we
understand the concerns of shareholders who have submitted the proposal,
we believe that ending genocide requires diplomatic and political solutions.

Thanks for posting Vanguard's stance on this issue.

Paul

When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Proposal 7—
A shareholder proposal to institute transparent procedures to avoid holding investments in companies that, in management’s judgement, substantially contribute to genocide or crimes against humanity, the most egregious violations of human rights.

If this were passed, it would ruin Vanguard, and I suspect that is exactly the reason it was proposed. Probably proposed by a group of unhappy active managers.

I read further up this thread that they were specifically targeting foreign companies in regards to the Sudan. If it is only foreign companies, then why would it affect the 500 index fund? What company on the S&P 500 supports genocide? Something seems very fishy with this proposal.

What I feel very uninformed about is who to vote for for the board of trustees in proposal 1 -- their short blurbs don't really say all that much about them or why they are fit for the position over the others. I don't really feel fine with blindly voting yes for all of them--guess I'll have to do some googling

Last edited by SLHI on Sun Aug 20, 2017 5:24 am, edited 1 time in total.

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To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

So I voted on these measures and voted against everything. Am I wrong to think that this is a legal, backdoor way on the part of Vanguard Management to take the Index out of Index Funds and incorporate active management into them?

Not trying to be paranoid here. It just seems this is what's going, to me anyways.

So I voted on these measures and voted against everything. Am I wrong to think that this is a legal, backdoor way on the part of Vanguard Management to take the Index out of Index Funds and incorporate active management into them?

Not trying to be paranoid here. It just seems this is what's going, to me anyways.

Which one(s) of the proposals did you find disturbing, and why? Hard to respond intelligently with so little info!

Broken Man 1999

“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

So I voted on these measures and voted against everything. Am I wrong to think that this is a legal, backdoor way on the part of Vanguard Management to take the Index out of Index Funds and incorporate active management into them?

Not trying to be paranoid here. It just seems this is what's going, to me anyways.

You voted against everything?

I saw no reason to vote against anything except Proposal 7, which was not proposed by and was opposed by Vanguard. I voted against Proposal 7. (I don't own any of the REIT fund, so I couldn't vote on those two proposals, but I would have voted for them.) I did vote for the board members and the other proposals. I thought they were entirely unobjectionable and in no way "took the index out of index funds."

So I voted on these measures and voted against everything. Am I wrong to think that this is a legal, backdoor way on the part of Vanguard Management to take the Index out of Index Funds and incorporate active management into them?

Not trying to be paranoid here. It just seems this is what's going, to me anyways.

It seems to me that others have felt similar things when they saw Prop 7. I think lots of folks aren't used to doing proxies, especially for individual companies. I don't have any statistics, but know some companies have had similar measures brought up. Usually, any shareholder (may have only 1 share) has a path to get an issue voted on by all shareholders. There are other "causes" out there that make the rounds with similar tactics.

I've been interested in the reaction. I may be wrong, but I expect many would be like me & not notice if a country was removed from the index. And I would not be surprised to find out that some countries possible in the index did not have a company included in the actual portfolio.

I didn't see anything remotely objectionable other than the proposal the board recommended a vote "against" as mentioned above. I usually pass on voting in these things, but I am glad I looked it over and agreed with their recommendations on the No vote. I have no idea who any of the guys I voted for on the board are or what their record is (good or bad), but it seems to be pretty insignificant as it relates to the funds I own.

OP: apparently a set of shareholders (not Vanguard) managed to get #7 added. I'm going to vote for the sole purpose of voting against it (folks that want to have judgements made about what companies should and shouldn't be included in an index fund based upon someone opinion about what is and what isn't responsible should simply invest in a socially repsonsible index fund rather than attempt to turn all index funds into social funds).

So I voted on these measures and voted against everything. Am I wrong to think that this is a legal, backdoor way on the part of Vanguard Management to take the Index out of Index Funds and incorporate active management into them?

Not trying to be paranoid here. It just seems this is what's going, to me anyways.

It seems to me that others have felt similar things when they saw Prop 7. I think lots of folks aren't used to doing proxies, especially for individual companies. I don't have any statistics, but know some companies have had similar measures brought up. Usually, any shareholder (may have only 1 share) has a path to get an issue voted on by all shareholders. There are other "causes" out there that make the rounds with similar tactics.

I've been interested in the reaction. I may be wrong, but I expect many would be like me & not notice if a country was removed from the index. And I would not be surprised to find out that some countries possible in the index did not have a company included in the actual portfolio.

It isn't actually about removing a country from the index, though the mention of PetroChina re: Darfur may be a pretext for much grander designs on excluding countries. I wouldn't know.

Anyway, Vanguard mentions in the proposal a means to determine who and how influential these shareholders are; it's good that we have a means for transparency in this process. I've already inquired with Vanguard and I hope they respond soon.

edit: Vanguard responded (only partially, as yet). Here is the number of shares backing each proposal:

If readers can't do anything with the content of a topic other than argue about it, it does not belong here. Examples include:

US or world economic, political, tax, health care and climate policies

conspiracy theories of any type

discussions of the crimes, shortcomings or stupidity of other people, whether they be political figures, celebrities, CEOs, Fed chairmen, subprime mortgage borrowers, lottery winners, federal "bailout" recipients, poor people, rich people, etc. Of course, you are welcome to talk about the stupid financial things you have done.

I was curious about folks feelings about the "manager of manager" arrangement as it applied to index funds. I noticed some of my index funds were affected, and can't figure out why they would need this:

2Approve a manager of managers arrangement with third-party investment advisors.
3Approve a manager of managers arrangement with wholly-owned subsidiaries of Vanguard.

While there has been extensive discussion of the proposals in the current Vanguard Proxy voting, nothing seems to have been discussed concerning the trustees that are up for election.

As an example, Deanne Mulligan has served as the CEO of the Guardian Life Insurance Company of America. Guardian is infamous for denying claims and horrible customer service. Is this a person that we want as a Vanguard trustee?

While there has been extensive discussion of the proposals in the current Vanguard Proxy voting, nothing seems to have been discussed concerning the trustees that are up for election.

As an example, Deanne Mulligan has served as the CEO of the Guardian Life Insurance Company of America. Guardian is infamous for denying claims and horrible customer service. Is this a person that we want as a Vanguard trustee?

If readers can't do anything with the content of a topic other than argue about it, it does not belong here. Examples include:

US or world economic, political, tax, health care and climate policies

conspiracy theories of any type

discussions of the crimes, shortcomings or stupidity of other people, whether they be political figures, celebrities, CEOs, Fed chairmen, subprime mortgage borrowers, lottery winners, federal "bailout" recipients, poor people, rich people, etc. Of course, you are welcome to talk about the stupid financial things you have done.